IBC Advanced Alloys Corp.

Good morning, everyone. Welcome to this IBC Advanced Alloys Investor Update webcast to discuss the company's financial performance for the quarter ended September 30, 2024. That's IBC's first fiscal quarter of 2025. Hi, I'm Jim Sims. I'm Director of Investor and Public Relations for IBC. Before we begin the webcast, just a couple of reminders. Slides from today's presentation and the audio of this call are being broadcast live, and we're making a recording of those. That recording will be available for replay on IBC's website later today at www.ibcadvancedalloys.com. After our formal presentation, we'll take questions from webcast participants. Now, during today's presentation, we will be making some forward-looking statements, and viewers are cautioned not to place undue reliance on such forward-looking information and statements. Additional information identifying risks and uncertainties is contained in IBC's public filings, available on CDAR.com and on our website, again, at www.ibcadvancedalloys.com. Joining us today is Mark Smith, who is Chairman of the Board and CEO of IBC Advanced Alloys, Mark, welcome to this morning's broadcast and please proceed.

All right. Thank you, Jim, and welcome, everyone. Good to be back here for another quarter. So let's go ahead and start. And for those of you who are new to IVC, let me start by providing a quick overview of our company and our operations. We are an Indiana-based manufacturer specialized in copper alloy products for the defense and global commercial markets. We are the only company in the US that both casts and forges copper and copper alloy products as its primary business. We are known for the depth of our technical expertise and our ability to maintain the highest product quality by operating a vertically integrated copper alloy manufacturing facility. In addition to our 2022 expansion, we have room for additional significant expansion of plant operations at our current site. IBC makes a variety of specialty copper and copper alloy products for hundreds of customers across multiple industry sectors, including those shown here. It's very diverse. Next is a representative sampling of some of our customers, both past and current. These are names that everybody likes to do business with. In the third quarter of 2024, which is our first fiscal quarter of 2025, IBC's copper alloys division faced some relatively but really insignificant softer demand and higher material costs. However, in spite of this, the copper team was successful in driving relatively healthy sales revenues of $4.9 million which very closely matched our performance in Q1 of 2024 fiscal year. Operating income dropped ever so slightly as well, but gross profit, gross margin, and adjusted earnings stayed steady as compared to the prior year period. On a consolidated basis, we booked a $1.2 million loss. While copper revenue remained steady, quarter over quarter, this loss was primarily driven by three factors. First, continuing closing costs at our EM division. Second, higher than normal corporate SG&A costs, which were largely due to the EM division closure. And three, debt service payments. Here you can see more detail of our quarterly results split between our continuing operations at Copper Alloys and our discontinued operations at our EM division. The main takeaway for me at this juncture is this as closing costs at our discontinued em division wide down over the coming months i see us moving to a substantially stronger footing with significant opportunity for growth as we continue to pay down debt and strengthen our balance sheet through organic growth i see a great see a great deal of upside for the company going forward Here you can see the continuation of the upward trends at copper alloys over the past four years in revenue and adjusted EBITDA. The bar at the right shows our trailing 12-month performance at the end of our fiscal Q1 2025 period. Next graph shows a continuation of what I see as a nice turnaround for the company in terms of net income. My goal and that of our entire team is to continue to build on the profitable performance we achieved in fiscal year 2024. To that end, I see several growth opportunities ahead that I believe will help us achieve this goal. As you can see here, copper has been on a very strong upward trend in terms of gross profit and gross margins. since we completed our $5.7 million expansion and modernization of our copper alloys manufacturing facility in Franklin, Indiana, in 2022. This vertically integrated facility has 32,000 square feet of new production space, which now totals 83,000 square feet of 12 acres of land. It provides vertical integration of alloy casting, forging, which includes hammer, press, and ring rolling, heat treating and machining operations. It has helped to generate sales growth from about $13.7 million to more than $25 million a year. And it positions IBC to expand our business with additional capacity. Here are a few of the longer term macro trend or macro growth trends that we see continuing to drive demand for our products. The global expansion of 5G networks and the Internet of Things is increasing demand for materials across all of our copper product lines. Growth in the electronics sector is also driving greater demand for our products. As markets for electric vehicles expand around the world, we expect to see much more intensive use of copper. That's very bullish for IBC. A number of our customers are in the power generation sector, and that includes the rapidly intensifying work in fusion energy. If the USC's return to major investment in oil and gas production, that is also a potentially strong area for potential growth for IBC. One additional area of potential growth I want to highlight, and it could be a big one for us, is U.S. Naval Defense It's widely recognized by both political parties in the United States that America has seriously fallen behind in terms of its competitive position vis-a-vis China in terms of surface and subsurface naval ships. Some of you have heard me say this before, but it bears repeating. Just one Chinese shipyard near Shanghai has more capacity than all of America's shipyards combined. The U.S. Navy shipbuilding plans for 2024 through 2030 is aggressive and understandably so. Ultimately, the Navy wants to get a fleet to over 381 ships and 134 unmanned surface and underwater vehicles. This is from a forecast low of only 285 ships in 2026. A special emphasis will be on submarines, including the Columbia and Virginia class subs. IBC has supplied the Navy for a number of years with a variety of copper alloy products, including for Columbia and Virginia class submarines. We are an approved supplier to both Electric Boat and Newport News, which are the U.S. Navy's primary submarine builders. We are in discussions now with defense policy leaders in Washington, D.C., and with officials at both shipyards about potentially expanding our ability to provide them with the specialized alloys they need. I hope to have more of this growth opportunity in the months ahead. And with that, Jim, I'm happy to take any questions today.

Thanks, Mark. Let's just take some questions. For those in the audience this morning, simply type your question into the chat thread on the screen. For those participating in our listen-only phone lines, you can go ahead and email your questions to me at jim.sims, S-I-M-S, at ibcavancedalloys.com. Or you can text me at 303-503-6203. As some of these questions come in, Mark, we did get a number of them the last couple of days. So I'm going to go ahead and pass those on and we'll talk about those. So the first question is, what is the current status of subleasing the EMC property in Massachusetts?